APRIL FOOLS

I think that my April fools was missing the rally over the last month! Beware of bogus news stories today. This day is famous for misleading market information under the guise of an April fools joke. Take MFE (McAfee) for instance. It has a history of rallying on April 1st due to the many April Fools computer virus hoaxes. You might be able to make a few bucks off of one of these fake rumors. The stock actually looks to be setting up for a pretty nice rally anyway.

The market ended Q1 with a little sell off today. I didn't see any fear in the selling (the VIX was only up slightly) so I don't anticipate any major move down over the next few days. The market has been in a sideways range over the last few days. The S&P 500 has fluctuated between 1165 and 1180. 1180 appears to be the next resistance area to focus on. I still think that we are more likely to move sideways over the next few days until Earnings Season kicks in on April 12th. I've been looking for spread trade opportunities due to the expected sideways trend. I like a Bull Put Spread or a Bull Call Spread on IPI. This stock has been rumored to be a takeover target which is why it shot up on Tuesday with some higher-than-normal volume. The trend is considered flat to slightly downward which is why I like the spread trade. It is likely that this stock will either go up or move sideways which would be great for either of these trading strategies. Some of the Gold stocks look like they might be ready to rally soon. It's hard for me to say that after being so bearish on Gold, but I can't ignore the price patterns that appear to be forming. The trend is still down on a lot of these stocks, but there might be an opportunity there if you are willing to take a chance. NEM seems to have one of the better patterns, but I'd still like to see if it can break out above $52. Have a great Easter weekend and remember that the markets are closed on Friday (Good Friday).

I know my blog postings have been down lately. I've been battling a flu bug for the last month. I felt like I was getting better about a week ago, but I've been hit again with a virus that has really wiped me out. I appreciate you patience as I try to regain my health and regain my energy for helping you guys trade this market. I apologize to those that have had to endure a class postponement due to me losing my voice. When I do get better, I am going to plan a free bonus class for all my blog followers to attend. I will cover a trading strategy that can make big returns in a very short amount of time (provided that the conditions are right). I'm doing this free bonus class to commemorate the one year anniversary of this blog. When I am ready to do the class, I will have you e-mail me at a special e-mail address to register for the class and get the class invitation. Have a great weekend.

MARKET RALLY?

It is odd for me to call for a possible market rally when I have been so bearish over the last few weeks, but the price action over the last few days may give the bulls reason to charge forward. The last two trading days (Thursday and Friday), the market gapped up then sold off near the end of the day. That price action is usually considered bearish, but the fact that the market hasn't sold of in any meaningful way gives the bulls reason to believe the bears aren't strong enough yet to push the market down. Monday will be key. If we don't sell off (100 points or more on the DOW or 10 points or more on the S&P 500) by the end of the trading day on Monday, I would bet that we will end up going higher. This would also be the case for the BA trade. It needs to start falling soon or it increases the probability that it will go higher. The bears may be gaining strength, but they might have to wait a bit longer. The market may trend a bit sideways for the next two weeks since Q1 earnings come out around the second week of April. I don't see much of a catalyst in the market (bullish or bearish) until then. This could set up some nice credit or debit spread trades over the next few weeks (for those that have had Course 2).

BEARS GAINING CONTROL?

The selling pressure and volume increased into close today. We already talked about the fact that the market was a bit overbought and was due for a pull back. The question right now is...Is this the start of the move down? I would assume that we could easily pull back right here. The VIX looks like it is starting to move up. The DOW Transports have already started to move down which could indicate that the market will soon follow. The two bearish trades that I have focused on in my classes this week are BA and CVX. I still don't think it is wise to be aggressive in this market, but you could start to look for some bearish trades in case the market does start to correct. I told you before that the Greece story is not done yet. Experience tells me that this is just the tip of the iceberg. The dollar is still getting stronger which will continue to put pressure on the commodity stocks. Have a great weekend.

BOEING TRADE

I normally don't update the blog during the trading day, but I see a nice possible pattern that you could look to trade. It is a counter trend trade which would make it a bit more risky, but the price pattern would suggest that it is a worthwhile risk. The stock is Boeing (ticker symbol BA). The price action last Friday (3/19/10) was very bearish. It gapped up then sold off on huge volume. When a stock has run up like Boeing, then has a gap up and sell off, it usually means that the stock is going to pull back soon. In the case of Boeing, I think it can pull back about $6 or $7. They key to this trade is to wait for confirmation and to keep the stop pretty tight. I would look for an entry if the stock breaks below today's low tomorrow. I would then look to place a stop above today's high. A more aggressive trade would be to get in at the close of the market today, then place a stop above today's high...unless it closes at the high. In that case, I would definitely wait for more confirmation before getting in.

ONE YEAR ANNIVERSARY!!!

It has been exactly one year since I started this blog for my students. We now have over 100 followers and lots of success stories. For those that are new to the blog, I encourage you to read over the archived blog posting. There is a lot of market commentary and information that is not generally covered in the courses. There are certain events and market indicators that I will explain and put into the blog. You can significantly increase your market knowledge by reviewing these postings. You will also see several of the good calls over the last year as well as some of the bad calls. Overall, you would see that by following the blog postings (and applying the trade and money management knowledge from the courses), you would have made a lot more money than you would have lost.
I'm sorry for the lack of blog postings over the last two weeks. With the exception of a couple of trades mentioned in the blog, I have mostly been sitting in cash. I will explain my cautious outlook in today's blog posting. The trend has turned back up according to the trend analysis steps I taught you in the course. There were clues that backed up the rally including several breaks above different resistance levels. I chose to ignore those clues because of the severity of the sell off back in January and the lack of volume in the recent rally. I've accepted the fact that I've missed most of this rally. It really doesn't concern me because I sat out based on price patterns that have led to very bearish moves in the past. The fact that these price patterns didn't lead to a bearish trend this time around just results in an opportunity cost in missing the rally. I've had a few trades get stopped out, but I haven't had much of a draw down during the last month. It's mostly been an opportunity cost. I'm patiently waiting for the next sell off to decide which direction I want to trade next. If there is a controlled sell off (bullish ABC pattern), I will probably look to get into some bullish trades and take advantage of the uptrend. If there is panic in the sell off, I will probably look to go short again. There is no doubt that the easy money over the last year has been made from the long side of the market. There are...however...a few reasons to be cautious right now. The first chart I will show you is the long term monthly chart of the VIX. Notice the last times that the VIX was down around this 17 level. 1998, 2000, the fall of 2001, from 2003 to 2007 it actually dipped below 17, and finally 2008 and here in 2010. With the exception of the bullish run from 2003 to 2007, can you see any correlation to the other dates? How about the crash of 1998 (Asian crisis which crippled Japan)? Or the internet bubble burst of 2000? Or the September 2001 terrorist attacks? Or the financial collapse of 2008? These are all major market corrections. Here in 2010, we are back at that 17 level in the VIX. Will we have a major market collapse like in 1998, 2000, 2001, and 2008?...Or will we have a sustained bull market (probably fueled by false stimulus...like government bailouts and subsidies rather than the real estate bubble) like in 2003 to 2007? Like the rest of you, I don't know the future. Which is why I'm preparing to trade it either way. A more recent trend to look at is the distance the market is from the 50 day MA. Look at the last 9 months. Each time the SPX has moved a certain distance from its 50 day MA, it has made a move to come back towards it. We are currently very near that distance. Also, keep an eye on the DOW Jones Transportation Average. It can sometimes be a leading indicator of the market. If you look at a chart of the Dow Transports, you can see that it made a strong move up during this last bullish run. If you start to see weakness or selling in this average, it could be a leading indicator of a possible market sell off. If it keeps moving higher, it could be an indicator of the strength of the rally. The sectors that make up in this index include the airline stocks (AMR, LUV, JBLU, CAL, etc), railroad stocks (CSX, NSC, etc), and airfreight stocks like UPS and FDX.

SUCCESS STORY

Bought JRCC puts on 3/9. I sold them on 3/16 for a 44% profit.

Since I have started using a money management plan, thanks my education from Jerry, my trades are going much better. I Have been using a stop and a profit exit contingent order on all my trades, and I can sit back and let it work (this really seems to reduce the emotion trading).

Howard M.

SUCCESS STORY

A little success story from the ABC pattern class.

Over the weekend in my Fibonacci & ABC pattern study, I noticed in my Life Insurance sector [ I am in the industry & wanted to see how the competition is doing ], that a nice pattern was developing with Lincoln National Life. They broke above both their 50 day MA & 10 day EMA last week at about the 25.5 level.

I bought 5 July 27.5 @2.75 and this morning the stock has spiked up to 29.72 for a profit on paper of $600. I have also entered a stop loss at $3.40.

Jerry, hopefully I looked at this correctly. It looked like they had some higher highs and the MACD was in “summer”. The RSI has gone well over 80 but I do have a stop loss in so I will at least get around a $250 profit.

I entered a couple other small ones on AMD & WMT.

Thanks,
John N.

SUCCESS STORY

Hello Jerry,

Just want to let you know of a few recent trades. On Feb 26/10 I bought 20 apr 24 ip contracts (Shane's picks) for $1.35. I sold half of my position on Mar 4/10 @ $2.10 for a 50% gain and the remaining 10 today, Mar 17/10 for $2.60 @ 92% gain.

On Mar 4/10 I set up a bull put spread on ip selling the 25 put and buying the 23 put it expires in 2 days and I'm up $2350 so far (max gain is $2500). I also set up a bull put spread on rimm selling the mar 65 and buying the mar 60 which I'm up $1500 (max gain 1550)

I wish I was still in class because of the wealth of information you give on the markets after the lesson.

Mike N

SUCCESS STORY

Hi Jerry,

Bought IWM calls on March 1, 2010 and sold on March 15, 2010 for a 150% increase in the options value.  Bought calls on SPY on March 1 and sold on March 15 for a 74% gain on the purchase of the options.  I saw this breakout on March 1st and quickly bought setting a tight stop in case the breakout failed.  However, it did not fail and I increased my account.

Justin B.

DOLLAR DROP?

With the Fed decision to keep interest rates down, we need to try to anticipate what effect this will have on the market. The most obvious effect would be a decline in the dollar. If this occurs, there should be a rise in commodity related stocks like oil and gold. This is what caused me to bail on my coal and gold put option trades. I don't normally like to get out of a trade prior to getting stopped out, but this news was likely to directly impact those trades...and it was information that I didn't have when I made the original trade decision. The market volume spiked up when the announcement was made near the end of the day. I'm anxious to see if this leads to a significant increase in volume over the next few days. Barring any unexpected bad news over the next few days, the market should continue to rally. With the VIX at these historic lows, I just can't get myself to buy into any of these uptrends. I'll see if I can find something I like.....but I still can't help but feel that we are due for a big blow that will cause us to drop quickly. I'd like to see how tomorrow plays out. If I see anything interesting, I will try to post it intraday.

BAILED

I bailed on my gold and coal bearish trades this afternoon. The Fed announcement appears to be bullish (at least for the short term), so I decided to get out with a small profit. If things reverse in the next day or two, I might get back in...but for now, I'm out. I will cautiously look for some bullish trading opportunities since we have clearly broken out in the S&P 500. However, I am now looking closely at the DOW to see if it can also break out to a new 52 week high. The Nasdaq broke out over a week ago.

BONUS

I was at a fundraising event tonight and listened to a great up and coming pianist/entertainer named Jon Schmidt. Although he has written some great original music, my favorite piece of the night was a mix of a Taylor Swift song and a song by the group Coldplay. The piece is titled "Love Story Meets Viva La Vida". Enjoy this version that I found on YouTube:
http://www.youtube.com/watch?v=KfH2BY5pdLw

COULD COAL MOVE DOWN?

The market traded sideways for most of the day before making a late session rally. The S&P 500 is sitting right at 1150. This was the resistance I have been talking about over the last few days. That late session rally is considered bullish although the volume was low again today so it's hard to tell just how significant the rally was. If we do end up selling off soon, there is a bearish pattern that I like (thanks to Howard M.). The pattern is JRCC. The trend is down and the stock just moved back below its 50 day MA. There appears to be a nice bearish ABC pattern that might have completed. That possible bearish ABC pattern has retraced the previous move down by about 50%. The reward to risk is very good. I would have a pretty tight stop somewhere above the 3/8/10 high. The initial downside target would be around $15.50 to $15. There are many other coal stocks that have possible bearish ABC patterns completing, but many of their trends are still considered up. I liked the pattern on JRCC best. The Nasdaq market has already moved to a new 52 week high, the S&P 500 is right at a 52 week high, and the DOW is just over 100 points away from a 52 week high. I'll be keeping a close eye on the market tomorrow to see if it can follow through on that late session rally...or if these bearish patterns in Gold and Coal can really start to pay off.

SUCCESS STORY

Jerry,

I bought 100 contracts of the IP 24 April calls at 1.55 based on Shanes Option pick

I put in an order to sell them at 2.10 today.

Profit of $5315.00

Success story. Real trade Today

I bought 50 contracts of NOK April 13 calls a few weeks ago ( Feb 18th ) for
.89 cents and sold them today for 1.61 with a profit of $ 3454.91 or 57% in less than one month

Today's Paper Trade

Sold 100 contracts of AIG March 40 dollar calls for 13,400.00

and bought them back 1 hour later for 9100.00

Profit of $ 4300.00 dollars

Looking forward to tonights class.

Richard R.

WEAKNESS AHEAD?

The market showed some weakness as it neared the 1150 area on the S&P 500. That possible resistance would need some confirmation, but it could be an early signal of an upcoming sell off...or a pause before a breakout rally. The price action in the DOW and S&P 500 over the last three days shows that the sellers might be starting to gain some strength. We should know the answer tomorrow. Gold sold off pretty good after being up in the early part of the day. The put option recommendations on GFI and GLD look pretty good so far. I also like FCX as a possible put option trade if the stock price can close below $77.50. They key here is a closing price below $77.50. That price level is important confirmation for the bearish trade. If a put option is purchased before that confirmation, it would significantly increase the risk in the position...many of you learned that from the put option recommendation on the SPY a few weeks back. We wanted to get in if it dropped below 106. We never got that confirmation which should have prevented us from losing money in that trade. Today's price action on the VIX was bullish...which of course could be bearish for the market. Keep a close eye on that indicator. If it starts to spike up, we want to be prepared to buy puts on the SPY or DIA and profit from a potential move down. If the S&P 500 breaks out above 1150 tomorrow, we want to keep an eye on the volume numbers to see if the volume increases significantly. If it does, we might want to look for some call option trades that we can get into.

NOT MUCH TO ADD

I haven't posted anything for the last few days, but it's because not much has changed. The volume is still very light. If the market can push through 1150 on the S&P 500, I might start to have more confidence in the rally. Today (Wednesday) is the 1 year anniversary of the 379 point move that kicked off this latest bull market. We are also coming up on the 1 year anniversary of this blog (March 23rd). I'm starting to see some bearish price action on gold. One of the most bearish patterns is on GFI. With a fairly tight stop, many of the potential trades had at least a 2:1 reward to risk. The GLD also had some bearish price action, but the price is currently still above its 50 day MA. I'm not looking for a major move down in gold, but it could have a shorter term sell off. The downside target on GLD is around $106.75. For GFI, it is around $11. Keep an eye on the VIX. It is sitting at a historically low level. There is strong support around 17. If you combine the VIX with the fact that the S&P 500 is reaching the resistance level of 1150, you can see the potential for an upcoming bearish move. No, I'm not going to predict another bearish move. I've already made one bad call with the last prediction. I will say that these are the conditions that often proceed a bearish move.

JOBS REPORT TOMORROW

The market had moved a bit sideways the last few days due in part to the anticipation of the jobs report due out Friday morning. I don't think it will have a major impact on the market unless it is very negative. The market seems to want to go up for now. I am remaining neutral and willing to sit on my hands for another week if I need to. I had a virus last Wednesday and needed to cancel some classes...my computer had a virus this Wednesday and I also needed to cancel a few classes. Hopefully all these viruses are gone and we can get back to business. Maybe this is a hint for me to start looking at the Biotech and Pharmaceutical sectors again. I really haven't traded them for over a year. Hold off on those financial stocks I told you to watch from the last posting. Many of them would need to drop back below their 50 day MA in order to be considered for a bearish trade. Have a great weekend.

NO CHANGE

Today's price action in the market was bearish, but not enough to move my outlook from neutral. The volume is still very light which is a big reason why I haven't turned bullish during this latest move. Some of you might feel frustrated that you missed a bullish run. Don't feel that way. There will be plenty of opportunities to make money in the market this year. Keep an eye on GS, MS, AXP, and COF. Wait until they drop below their 10 day MA for confirmation. They are all at a key resistance level and their 50 day MA's are all trending downward.

MOVING TO NEUTRAL

Thank you for the "get well soon" e-mails last week. I am feeling a lot better. The market continues to rally despite my bearish outlook. We clearly moved above the 50 day MA with today's move and we are testing the 1117 resistance level. As the market keeps breaking above these resistance levels, it is exhibiting the behavior of an uptrend. Since the 50 day MA is not yet trending upward, I will take a more neutral stance. This means that I won't be looking at bearish positions unless we drop back down below the 50 day MA. I also won't be looking at bullish positions unless the 50 day MA starts to trend upward. This doesn't necessarily mean I won't make any trades, but that this is not a highly probable area for either bullish or bearish trades. I was stopped out of my put option trade on the SPY. As I mentioned in an earlier posting, I don't see much upside potential compared to the downside potential. Be ready to enter put option trades if the SPY dips back below the 50 day MA. For those that are a bit more cautious (like me), you could set up a contingent order below 110 on the SPY. The lighter than normal volume on this latest rally should reinforce the need to be cautious. I still like the bearish patterns on GS, MS, AXP, and COF. They haven't really participated in the recent rally in the market. I also like FCX as a potential bearish trade. Today's price action was bearish and it is sitting just under its 50 day MA (which is trending downward).